Abstract:
Conventional wisdom suggests that energy efficiency (EE) policies are beneficial because they
induce investments that pay for themselves and lead to emissions reductions. However, this belief
is primarily based on projections from engineering models. This paper reports on the results
of an experimental evaluation of the nation’s largest residential EE program conducted on a
sample of more than 30,000 households. The findings suggest that the upfront investment costs
are about twice the actual energy savings. Further, the model-projected savings are roughly 2.5
times the actual savings. While this might be attributed to the “rebound” effect – when demand
for energy end uses increases as a result of greater efficiency – the paper fails to find evidence of
significantly higher indoor temperatures at weatherized homes. Even when accounting for the
broader societal benefits of energy efficiency investments, the costs still substantially outweigh
the benefits; the average rate of return is approximately -9.5% annually.